Daily Market Update

Theresa May to Face No-Confidence Vote Today

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The U.S. dollar gained across the board yesterday on news abroad and hopes that the Chinese-US trade war may be easing.

Overview

The greenback is under light pressure this morning, most notably against the British pound.

This morning’s economic data will likely keep the dollar for losing much ground as it bolsters the argument that the Fed will raise interest rates next week. So-called “core” consumer prices, which excludes food and energy costs, rose 0.2% from last month and 2.2% on a year over year basis. Underlying inflation is just above the Fed’s 2.0% target. Odds that the Fed will raise rates for a fourth time this year next week have crept higher after falling last Friday following poor jobs numbers. Odds are currently at 74.0%.

Mexican banks are closed today for Our Lady of Guadalupe Day.

What to Watch Today…

EUR

The Euro may take a back seat during today’s trading with all eyes on Great Britain, but there is still plenty to follow on the continent. The French government will face a no-confidence vote tomorrow. The current administration is likely to hold on to its majority, however. President Macron has been under increase pressure by the “Yellow Vest” protests and his decision to increase spending to appease them. The move could push the deficit up to around 3.4% of GDP which is against European Union budget rules.

The European Central Bank meets tomorrow and is expected to end their current quantitative easing program.

GBP

GBP/USD continues to experience wild swings. The sterling lost significantly during yesterday’s session on news that Prime Minister Theresa May would face a no confidence vote within her own party, which would be seen as a major setback for Brexit. However, the currency has jumped nearly a percent from its lows after a report by BBC stated that 158 Conservative party lawmakers say they will support May in today’s vote. The vote will be held in secret but the comments of support from Tory lawmakers boost her chances of her keeping her job. Per Bloomberg, we should know the results by 3 p.m. Eastern. If she passes the vote, we will end up right where we were on Monday with May trying to get extra concessions from the EU before a vote in Parliament. If she fails the no-confidence vote, chaos would ensue for the sterling.

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